London Business School Case Book 36 London Business School Case Book
Total Page:16
File Type:pdf, Size:1020Kb
52 London Business School Case Book 36 London Business School Case Book BCG Bain & Company Iceberg 36 London Business School Case Book Entertainment Co PROFIT Bain & Company London Business School Case Book 39 Bain & CompanyEntertainment Co PROFIT Exhibit: UK ice cream tub prices (show to candidate) Entertainment Co Case Summary for Interviewee Exhibit 3 – Most recent performance results from 3 selected tour stops Market price architecture ExampleSituation products Case Summary for Interviewee• PremierCity A touring live entertainmentCity B companyCity C Average ticket price: $100 $80 $90 • Company has enjoyed fiLondon ve Business years School Case of Book tremendous85 growth in ticket sales and revenue Total shows:Situation 85 45 75 Total attendance: McKinsey & Company 210,000 75,000 180,000 • Premier touringOldPharma live entertainment company Occupancy rate: Complication95% 64% 92% 7.00 -7.99 Variable• costsCompany per show: has enjoyed fi ve years$60K of tremendous growth$50K in ticket sales and revenue$60K London Business School Case Book 57 Fixed costs Question 2 • While$8M ticket sales and $4Mrevenues have continued$6.5M to grow steadily, profi tability growth has lagged Complication The team wants to explore BioFuture’s current drug pipeline. The team decides to focus fi rst on evaluating the value of 6.00-6.99 # of stops in previous 5 years:BioFuture’s drug pipelineHaagen – both its current Dazs portfolio,5 as well as its ability to generate drugs2 on an ongoing basis. What 3 • While ticket salesissues should and the teamrevenues consider when have evaluating continued the value of BioFuture’s to growexisting drug steadily, pipeline? profi tability growth has lagged BCG Year of fi rst visit: BenKey & questionJerrys2001 2008 2006 5.00-5.99 Ensure to mention different• issuesWhat instead ofis immediately the rootdiving very cause deep into one issue.of theThen ask client’s your interviewer iflagging profi tability? Key question he/she wants toTesco go deeper on any Finest of them. Cupid’s Arrow • What is the root cause of the client’s lagging profi tability? 4.50-4.99 A good answer would include the • Costs to manufacture and sell, e.g., • Side effects and potential legal Case structure – Step 3following: marketing, distribution, etc. exposure, e.g., potential law suits Further cost of R&D until each drug due to unexpected side effects London Business School Case Book 91 is ready to be sold. Please• followPress about thesethe drugs, steps e.g., have below to guide you through the case. McKinsey & Company famous doctors called for this kind • Emergence of substitutes – are Please followRefreshNow! Soda the steps below to guide you through the case. 4.00-4.49 Structure Potential value of selling each drug. Analyseof drug, is it only slightly improving competitors working on substitutesAdvise • Market size, e.g., size of patient on what is on the market already? already? Is it about speed and Question 2 population, pricing does BioFuture have enough After reviewing the key factors RefreshNow! should consider in deciding whether to launch O-Natura, your team wants to Frame the understandUse the beverageframework market and consumer topreferences toDig gauge potential deeper success of O-Natura. Develop insights Synthesiseresearchers what working Make on the a 3.50-3.99 The bottled market splits• into non-sparkling,Market sparkling,share, and e.g., imports. number Flavored water offalls within non-sparkling.A veryYour team good answer would also respective drugs? problem has gatheredguide the following analysis information on the U.S. bottled water market. The information shows an estimate for the share of you learned recommendation fl avored water, as well as the currentcompetitive share for the two drugsmain products: in CoolR&D and O2Flavor.or on include the following: Case structurethe – market; Step different 1 sideCase effects, structureRisk level – Step• 1Strength of underlying patents, i.e., Exhibit 1 convenient dosing schedule (i.e., Fictitious• Likelihood exhibit clinical trials of a drug how likely is it that a competitor U.S. Bottled water market patients are prescribed to take a will prove effective can successfully copy BioFuture’s 3.00-3.49 Millions of gallons drugNon-sparkling at regular intervalsFlavoured that (by product)are drug? 100% = 8,000 London Business School Case Book 79 Exhibit: Historic and projected growth ofeasy to rememberthe such UKas once a London online •Business Likelihood School Case drug Book will win109 datingregulatory market Cool 20% Marakon day or every 12 hours), etc. approval Roland Berger Strategy Consultants AirJetStructure Inc. Non-Flavoured 95% 5% Flavoured 10% 02Flavour Analyse Advise 2.50-2.99 Private Jet Co (PJC) – Fleet Renewal Iceberg 1L Vanilla €2.82 70% Structure Analyse Advise (show to candidate if this data is requested) Other Question 3 Creative Problem Solving for Case Interviews Using a typical profi tability framework, the candidate should make the following observations Frame theBased on the target priceBelow and upfront is a• UsedescriptionIn order to launch framework O-Natura of expected, • The probability VP of Operations to estimates of success, Dig bydeeper stage, in the Pharma R&D pipeline.Develop insights Synthesise what Make a Retail price segment €/L StepThe Interview 1: Identify Process thefi xed evaluation costs, what share structure of the fl avored RefreshNow! would need to incur that each bottle would cost $1.90 non-sparkling bottled water would $40 million Tescoas total fi xed costs, to1L produce and deliverVanilla in the newly €2.22 2.00-2.49 • The Jet Engine business is • The problem lies with the Jet • Jet engine parts are complex and A simple evaluation modelO-Natura can need be to captureused in orderThe to key differentiatorincluding marketing here expenses is as establishedcriteria process. including cost, safety, prestige, problemunprofi table while the propeller Engineguide business analysisFrametypically the bought from specialized Use framework to Dig youdeeper learned Developrecommendation insights Synthesise what Make a to generate three NPV breakcases. even? The Here iskey some additionalrecognising well that as increased there costs is a across third way – comfort and the latest facilities (e.g. business isinformation highly profi for youtable to considerNote: as you “Filing”the production is the and processdistribution of submittingOEMs all of the clinical and safety evidence from Phase I, II, and III trials, and asking point here• is toGross fi rst margins createform yourin a the baselineresponse: Jet Engine refurbishment.CaseAdditionalnetwork information This is hinted at in theBook being able to connect phones and case in which the cash• fl owO-Natura of a would do- launch in a question16 oz. and will be made available laptops while in fl ight). business are muchpresentation lower (1/8 than of a gallon)thefor with regulatory •a Costs and approval hence margins problemto are actually in sell the drug. guide analysis you learned recommendation Propeller businessprice of $2.00 to retailers line with market average nothing approach is calculated. Once in Athe Practical information Guide above on How should to Crack the Case Interviews 1.50-1.99 this has been achieved, the same candidate ask the right questions. The CAGR 300 calculations can be re-run• Ask for for the clarifi other cation of informationaircraft if necessary age is a key driver of costs but Step 3: Analyze the Jet Engine RegionalHow Aircraft can Business you dig deeper to fi nd the source of the problem? investment scenarios. • Take notes of the numbersthe customer is driven by a range of ExhibitDo you 1 have a hypothesis about what is causing the problem? Fictitious exhibit • Take time to plan out how to approach the calculation ’12-’14 278 The candidate should focus the rest of the discussion on the Jet Engines business and understanding market size, growth and profi• tabilityDescribe withinyour approach the segment. and talk the Provide interviewer the through following your calculation. information The more(in full you or talk as the requested) easier it will be for 1.00-1.49 your interviewer to helpExpected you probability of success, by stage of research and development Percent Other (~ 20 players <£2m) 1 Baseline (Do-Nothing) 2 Re-New Fleet 3 Refurbish Fleet +36% Market Structure and Economics Tesco Val. 2L Vanilla €0.78 250 Overall Market Economics 0.00-0.99 Calculate revenue from declining 2011, $mCalculate revenue which will hold fi rm as Calculate revenue which will hold fi rm Table4Two utilisation as customers choose customers continue to use PJC’s newer as customers continue to use PJC’s Total US Market Size 3,520 competitors’ planes’ over PJC planes 70%newer planes (cabin not aircraft40% is 50% 90% Successful Average Costs per Aircraft $6.8 Phase I Phase II Phase III Hints Candidate drugs important) Filing marketing Calculate variable# of Jets costs Sold driven by cost 440Calculate variable costs which willtrial trial trial and sales Exhibitper 1: Block Interviewee Hour,Total which Capital will Invested increase should over 3,300 immediatelyremain stable due to lower recognise maintenance disparityCalculate variable in growthcosts driven of revenues and profi t. TakeAChance the time due to aircraft age and fuel costs on newer planes by cost per Block Hour, which will Cost of Capital 10% increase over time due to aircraft age 50% 10% ExhibitCalculate 2: Interviewee cash fl ow which will be should the pointCalculate out cash fl thatow driven the by investment unprofi30% table